Wednesday, December 21, 2016

Tesla Boosts Credit Lines Again To Aid Elon Musk Expansion

Electric carmaker’s credit facilities reach about $1.8 billion; CEO Musk had played down need to expand lines this quarter.

By Kevin Miller and Keith Naughton

Bloomberg

December 21, 2016

Tesla Motors Inc. increased its borrowing capacity under two credit agreements by about $500 million -- two months after Chief Executive Officer Elon Musk tweeted that raising debt wouldn’t “be necessary” before the end of the year.

Tesla, which last month acquired money-losing solar-roof installer SolarCity Corp. for $2 billion, boosted a credit line with Deutsche Bank AG by $200 million, according to a regulatory filing Tuesday. The company has the potential to add another $50 million to that agreement, and also increased a separate credit facility by another $300 million.

Musk surprised investors in October by saying Tesla didn’t need to raise equity or borrow money this quarter, when some analysts were saying it might soon need $2.5 billion to cover the entrepreneur’s ambitious plans. With Tuesday’s disclosure, Tesla’s credit lines would reach about $1.8 billion.

“I don’t think it’s that shocking that over time Tesla needs more funding,” said David Whiston, an analyst with Morningstar Inc. in Chicago. “It’s young and has enormous growth plans, so over time I would expect more equity raises and more revolver capacity.”

Tesla isn’t commenting beyond the contents of the filing on plans to expand its credit lines, said Sarah O’Brien, a company spokeswoman.

Musk’s Plans

The automaker that sold roughly 50,000 cars in 2015 aims to crank out a half-million vehicles annually by 2018. Most of those sales are expected to come from the Model 3, Tesla’s first mass-market electric car scheduled to debut by the end of next year. The company also is building a massive factory for battery production east of Reno, Nevada, and Musk has mapped out a vision that includes production of energy-generating solar roof tiles that integrate with the company’s power-storage units.

Tesla reported a quarterly profit in October, the first for the Palo Alto, California-based company in eight quarters. Tesla and SolarCity -- both chaired by Musk -- have conducted five separate equity offerings since the San Mateo, California-based solar company went public in December 2012.

On Dec. 15, Tesla and a Netherlands subsidiary increased a revolver line by $200 million to $1.2 billion, with potential to add another $50 million, Tesla said in the filing. Tesla Finance LLC and another finance unit doubled the size of a separate credit facility to $600 million.